Super Group’s earnings hit by local logistic issues

Super Group says SA’s logistics constraints are making domestic hauliers less competitive as copper exports destined for the key Chinese and Middle East markets are diverted from Durban to Walvis Bay and Dar es Salaam.

This comes as the JSE-listed logistics and fleet solutions group on Monday warned shareholders its full-year profit would fall by nearly a third when it reports its results on September 11, sending its share price plummeting to its lowest level in 15 weeks.

Super Group joined a plethora of companies including mining houses, logistics, travel and leisure companies that have lamented the decay of SA’s third-largest city and the subsequent effects and losses incurred. As a trading link to the Far East, Middle East, Australasia, South America, North America and Europe, Durban is a crucial hub for the Southern African region.

Poor Transnet service, characterised by incessant bottlenecks and backlogs at SA’s main port, has seen neighbouring ports including Maputo expand quickly in recent years to meet growing demand from the region’s expanding economy.

The group, with a R8.6bn market capitalisation on the JSE, said a weak rand and load-shedding in SA were compounded by heightened operational challenges in rail and port infrastructure, causing it to lose out on the recent surge in copper exports.

Super Group said lengthy turnaround times at SA ports, border delays and a notable decline in coal export volumes had a detrimental effect on the performance of industrial and commodity transport companies.

“The vast majority of copper exports bound for China and the Middle East are being rerouted from Durban to Dar es Salaam and Walvis Bay,” Super Group said. “The loss of southbound volumes has made SA hauliers less competitive, resulting in lower revenue and margins.”

Though Chile is the largest exporter of copper in the world, China also imports copper from Botswana, the Democratic Republic of Congo and SA.

Super Group said the Tanzanian port of Dar es Salaam and Namibia’s Walvis Bay were benefiting from Durban’s decline as both ports had invested in upgrades of handling equipment and security, increasing capacity and benefiting from a surge in copper exports.

However, it said prevailing cabotage laws — regulations placed on foreign-flagged ships — also affected both SA and Zimbabwean hauliers operating into Dar es Salaam, in particular.

The loss of business for the bulk of Durban port puts pressure on Transnet’s management to turn its operational challenges around.Last week Business Day reported that Transnet plans to invest almost R25bn in the next five years to expand and reposition its ports. 

The plans include upgrades to the country’s three automotive terminals in Durban, East London and Gqeberha, while also taking advantage of the opportunities presented by the influx of cruise liners to the western region of the country.

However, Transnet is starting to improve, according to Business Unity SA, even though the World Bank’s most recent report listed SA ports among the worst in the world.

In July, steel giant ArcelorMittal SA suspended plans to mothball its longs business in Newcastle and Vereeniging, thanks in part to Transnet’s pledges of improved efficiency.

Super Group’s share price fell the most since March 2020, when the pandemic struck SA, down 14% to R25.39, on Monday after it said it expected headline earnings per share (HEPS) to fall 20%-30% in the year to end-June.

It said several factors in its supply chain businesses in Europe and Africa, as well as UK dealerships, had been impeded by supply chain disruptions, geopolitical tension, margin erosion, higher net finance costs due to high interest rates and a sharp fall in the volume of European vehicle parts distributed.

Additionally, the group said it incurred bad debts as a result of financially troubled coal mining customers, such as Salungano (formerly Wescoal).

Super Group operates a network of vehicle dealerships, as well as several mobility solutions across SA, the UK, Europe and Australasia. Its supply chain, dealerships and fleet solutions businesses offer a comprehensive range of services across 21 countries.

gumedemi@businesslive.co.za